The Chinese Dragon Sweeps Through Latin America

Any U.S. policymakers who doubt the strategic and economic significance of Latin America should spend a few minutes chatting with their counterparts in Beijing.

Over the past decade, China has been on a wild spending spree throughout the Western Hemisphere targeting Brazilian iron ore, Chilean copper, Peruvian zinc, Argentine soybeans, Venezuelan and Ecuadoran oil, Uruguayan meat, Bolivian lithium, and other economic resources. The Chinese have flooded the region with both investment and cheap labor (about which more later). They are funding construction of a hydroelectric plant for Ecuador, a satellite for Bolivia, and much else. Beijing already built a satellite for Venezuela, which launched in 2008, and a national soccer stadium for Costa Rica, which opened this year. In March 2010, the China National Offshore Oil Company announced that it was purchasing 50 percent of the Argentine firm Bridas, and Bridas subsequently bought a $7.1 billion stake in the Argentina-based Pan American Energy. In October, another Chinese energy giant, Sinopec, agreed to invest over $7 billion in the Brazilian operations of Repsol, a Spanish company.

China’s fast-growing economy needs massive supplies of petroleum, so we should not necessarily be surprised that Beijing has pursued Latin America’s abundant oil and gas reserves. But we should be somewhat alarmed that, in the face of China’s growing regional presence, the Obama administration continues to treat Latin America as an afterthought. Speaking at Brown University in early April, Colombian President Juan Manuel Santos (a strongly pro-U.S. leader) criticized Washington’s apparent lack of interest. “While the rest of the world, while Europe and Asia, are strengthening their ties to our region, the U.S. is passive, is disengaged,” Santos said. The hemispheric leadership void has been filled not only by China, but also by Russia, which is enabling Venezuela’s gigantic arms buildup, and by Iran, which has established a strategic partnership with Venezuela and is cozying up to populist governments in Bolivia, Nicaragua, and Ecuador.

True, the Obama administration is finally preparing to send Congress the Panama and Colombia free-trade agreements (FTAs) which were originally signed several years ago by the Bush administration. But it should have finalized these deals much sooner. Throughout 2009 and 2010, the United States did virtually nothing to promote hemispheric trade liberalization. Meanwhile, it provoked a needless trade dispute with Mexico by banning Mexican trucks from U.S. roads.

The best that can be said about Obama’s Latin America policy, thus far, is that his administration eventually came to the correct position on free trade, and that it eventually came to the correct position on the 2009 Honduran political crisis (after wrongly labeling the ouster of Manuel Zelaya as a “coup” and effectively outsourcing the issue to the dysfunctional Organization of American States). Obama wisely traveled to Brazil in mid-March to fortify U.S. relations with Latin America’s biggest and most populous country. But as the Christian Science Monitor reported, following the president’s visit, Brazil gave Obama a “cool reception” that “contrasts with China’s quiet but effective cash diplomacy in the region.” His administration sought a rapprochement with Ecuador, but its efforts were not reciprocated. Last month, the country’s increasingly authoritarian left-wing president, Rafael Correa, expelled the U.S. ambassador from Quito in a fit of anger over the WikiLeaks cables.

Each of Obama’s four immediate predecessors in the White House spearheaded at least one major hemispheric initiative. Under Ronald Reagan, the U.S. established both the Kissinger Commission on Central America and the Caribbean Basin Initiative (CBI). Under George H. W. Bush, it launched the trade negotiations that ultimately led to NAFTA and also started the Enterprise for the Americas Initiative. Under Bill Clinton, it completed NAFTA, formed the Summit of the Americas, expanded CBI trade preferences, and pushed for a Free Trade Area of the Americas. Under George W. Bush, it signed FTAs with Chile, Central America, the Dominican Republic, Peru, Colombia, and Panama, while also creating the anti-drug Mérida Initiative.

Obama has yet to unveil any original Latin American initiative of similar size and scope. Beijing, by comparison, is brimming with ambitious plans for the region. For example, it has proposed building a $7.6 billion “dry canal” (a railway line) that would stretch across Colombia and connect the Caribbean with the Pacific Ocean. Such a project would obviously have enormous economic and strategic consequences. The competition for influence in Latin America is not a zero-sum game, but it’s still worrisome that Chinese influence is surging at a time when U.S. influence appears to be stagnating or perhaps even declining. Beijing’s rapidly expanding regional footprint threatens to hurt the diplomatic interests of Taiwan, which has spent decades cultivating partners in the Western Hemisphere.

While dollar diplomacy has boosted Beijing’s image in the region, the concurrent influx of low-wage Chinese workers has generated tensions. The Chinese government seems to harbor a quasi-colonial attitude toward developing countries, and its heavy-handed approach has produced a considerable backlash. On the “soft power” side, moreover, the U.S. still holds a significant edge over its Asian rival.

Hopefully, the U.S. will use China’s increased hemispheric activity as motivation to reinvigorate its own engagement. When it comes to Latin America policy, the Obama administration has largely wasted its first 27 months in office. Across the region, as Beijing continues its aggressive outreach, patience with U.S. dithering is wearing thin.